Surprised by Labor Hearing After Dismissing Staff for Poor Performance – What Should We Do?

Greetings! We dismissed a staff member two months ago due to consistently poor performance at the job. Several memos and emails were issued regarding the poor work performance. This employee refused to acknowledge any memo and declined to accept a dismissal letter along with one month's salary compensation. During the dismissal, we presented all the evidence of her poor work, which was detrimental to the company's reputation, finances, and time.

Unexpected Labor Department Hearing

Out of the blue, we received a letter from the labor department office asking us to attend a hearing to discuss her dismissal. She is an office staff member working in the sales department, appointed by the HR Manager with an appointment letter. We are surprised if office staff even fall under the labor category and can approach the labor office. We have a hearing next week. Can someone please guide us on what to do in this case? Thank you.

Dear Prasad Shah,

Though you have written about the termination of the employee, you have not specified:

a) How many subordinates reported to the employee before the termination?

b) Before terminating the employee's services, did your company conduct the domestic enquiry? If yes, was it as per the laid down procedure?

Now, the employer has received a notice from the labor department. They can send a representative and show the pre-termination records. What the labor office says after verifying them remains to be seen.

Otherwise, the employer can just ignore the notice. Though this option is also fraught with risk, it is worth taking. In such a case, the labor officer may send one more notice. If that is also ignored, the only remedy the terminated employee will have is to file the suit in the labor court. If it happens and, if the employer receives the court's summons, then it has to be honored and cannot be ignored like the notice from the labor officer.

If you terminate the delinquent employee without conducting the domestic enquiry, then you have put yourself on a sticky wicket, which is a foregone conclusion from this post.

Thanks,

Dinesh Divekar

Hi Prasad,

There is nothing to panic about. As Mr. Dinesh rightly observed, when someone raises an issue, please provide full details. This will help those who respond to properly interpret and give an appropriate response.

Registration under Shop Act or Factories Act

We need to know whether the office is registered under the Shop Act or Factories Act. If it is under the Shop Act, the individual can still raise a dispute before the Labour Department claiming that the dismissal is unauthorized. Before that, the nature of duties needs to be examined. Consider whether the individual has any subordinates and whether they fall within the definition of a workman. If they were performing managerial duties, you can directly send the termination letter citing the clause in the appointment letter.

Handling Labour Department Notices

However, upon receiving a notice from the Labour Department, you can attend the first hearing and obtain a copy of the petition. Consult and prepare an appropriate reply statement to file on the next hearing date. If the conciliation fails, a failure report will be sent to the government, and the concerned individual may raise a dispute before the Labour Court. At that time, you can be represented through your counsel to defend the case. Do not worry and handle it appropriately.

Regards,

Scope of the Industrial Disputes Act for Office Staff

The office staff will also come under the category of workmen and fall under the scope of the Industrial Disputes Act. However, a person who has been supporting the sales team to achieve the sales target by and large will come under the category of employees with a purely administrative role. Though sales promotion employees of some industries fall under the scope of the Sales Promotion Employees (Conditions of Service) Act, not all salespersons will come under the said Act.

Understanding Labor Department Letters

Regarding a letter from the Labor Department, I would say that the same is only a routine intimation. If you have enough proof to show that the employee was given opportunities to improve his performance, the question of reinstatement will not arise. Second, termination can be dismissal or termination simpliciter. If you have paid or are ready to pay notice pay as per the contract of employment or as per the ID Act, as the case may be, the same is enough. It is not necessary that in all cases, there should be a domestic inquiry before an employee is terminated. In Dr. Mrs. Sumati P Shere Vs. Union of India, what the Apex Court observed was that termination of an employee on poor performance should have been done after informing the employee concerned. In this case, the employee was appointed for a temporary/ad hoc period. At the same time, no officer will say that an employee who does not meet his day-to-day targets, spends more time on breaks, overstays intervals, or takes leave without intimation should be retained.

Therefore, what I feel is that you should attend the hearing and explain what exactly has taken place in the case of the said employee. Then instead of reinstatement, the officer will order payment of notice pay, which may be equal to one month's salary.

Thank you everyone for giving a reply and valuable guidance. As more details are requested, I would like to state the following:

1. The employee joined our company on March 23 with a qualification of only HSC Pass. However, a VP in the company, on human grounds, provided a job to this underqualified woman to support her.

2. She was appointed as a Sales Assistant to make invoices, e-way bills, maintain sales records in Tally and Excel, arrange sales and dispatches in the absence of seniors, and also in charge of payment recoveries. She didn't have subordinates below her.

3. We are registered under the Factories Act, not the Shop Act, as we are a manufacturing unit and have this admin office in the city to handle the operations easily rather than far from the city.

4. For the last year, her performance constantly deteriorated. She also became a troublemaker, picking fights with other employees, not respecting even the Managing Director, making endless mistakes at work, ganging up with others to hurt the company's interests, and provoking others to go against management. In fact, her stance was that no matter whoever makes whatever mistake or indiscipline within the company, management should keep quiet, or she threatened to file false allegations or reveal company secrets. Once the HR Manager warned her not to make tea on her own in the office, she gave a two-page legal letter stating that HR was threatening her and she didn't feel safe inside the company, playing the victim card. We found that she even provoked other female employees that if any male employee scolded them for a work mistake, they could raise a workplace harassment complaint against them. She even brought her husband to the office once and made violent threats to the HR Manager.

Several memos were given to her, but she refused to accept any. An internal inquiry was conducted, and detailed emails about her misconduct, poor work performance, and false allegations were sent. But she didn't respond to the emails. Her anti-authority behavior spread wrong ideas among other staff. So finally, we had to terminate her, citing all the reasons for poor work performance. She didn't sign the letter, refused to accept one month's compensation, and left.

She got along with the CITU labor union, and CITU seems to have assured her that they would save her, and the company couldn't do anything to her. So her work and behavior both worsened by the day. We are certain that the next step is court summons only once labor office talks fail. We need to know how strong our case is. We don't understand what you meant by a domestic inquiry. Our HR manager sent enough memos, and we conducted an internal inquiry into her poor work and bad behavior. Other than that, did we miss anything that may go against us?

Sorry for the long message, but as some have asked, I didn't leave out any details this time hopefully. Please guide us, thank you.

Termination Procedures and Probation Periods

First, if her date of appointment was in March 2023, you should not have waited for approximately two years to terminate her. It is often found that employers give an appointment order without specifying any probation period. Certainly, if she was under probation, we would have had the flexibility to take action, even by dismissing her without showing any reason or notice if she was involved in activities against the management.

Termination Without Stigma

Second, since we have proof that she was given warnings at regular intervals and was warned to improve her performance, you can certainly argue that her termination was not stigmatic but rather simpliciter. Only in cases of termination causing stigma is an inquiry legally mandatory. If the employer finds that an employee is unfit for the work assigned, he can ask her to leave by giving notice or wages in lieu of notice. The remedy available is offering one month's pay. The maximum the Labor Officer can direct is to pay compensation, considering the termination as 'retrenchment.' In such a scenario, the compensation will not exceed 15 days' pay for every completed year of service, i.e., again 30 days' pay.

Handling Union and Labor Officer Involvement

The Union will always mislead employees, especially in cases of termination. However, when you are called for conciliation by the Labor Officer, you can discuss the matter and explain that you cannot rehire an employee who cannot accept your office culture. Therefore, the chances of referring the matter for adjudication are remote, but the Labor Officer himself will likely come up with a solution.

Dear Mr. Prasad,

The reason for termination was "Poor Performance." Was this clause included in the appointment letter, or is it part of the Company Standing Order? These aspects will be crucial during the reconciliation process and may also be relevant in the labor court.

Thank you.

Termination Simpliciter vs. Dismissal

This should be considered as termination simpliciter and not dismissal. In the absence of Standing Orders, the terminal clauses in the appointment order shall be considered valid.

Relevant Case Citations

The Workmen of Sudder Office, Cinnamara vs. Management of Sudder Office And Anr ((1972)4SCC746) and Amy N. Irani vs. Makers Development Services (P) Ltd ((2003)IILLJ847BOM) are a few citations wherein the Courts have said that employment is based on trust, and the employer cannot be compelled to let one continue if trust and confidence are lost.

Application to Current Case

In this case, the employer seems to have lost confidence in her, and it was after repeated requests to improve her performance and attitude that the employer terminated her. Therefore, principles of natural justice have been followed. Moreover, the employer has initiated a termination simpliciter by offering her one month's salary in lieu of notice.

Dear Prasad,

Greetings. As per the inputs given by Madhu, it's more than enough. You don't need to panic in any way. You have clearly mentioned, "several memos and emails were given about poor work performance." I would like to ask, did you put the employee into any special training based on her performance?

If you have not provided any training based on performance and have directly dismissed her, the hearing that you are being called for will ask you to provide her training and give her one more chance.

It would be great if you could share with me the exact details of the officer who sent you the letter for the hearing, the date of the hearing, the venue, and your company details. I can help you with a smooth process.

Note: Being a company VP, it's not mandatory for you to be directly present for the hearing. You can designate a representative from the HR team and legal team to attend the hearing.

Please share the details so that we can help you officially regarding the same.

Dear,

The Labor Department has full authority to conduct dispute hearings. First, you need to review the conditions in the worker/employee's appointment letter to see if they include provisions for termination if the worker/employee fails to meet sales-related targets.

Check your establishment's standing orders to see the provisions for removing workers or any other employee, such as conducting an internal inquiry, and ensure you have followed those provisions. Attend the Labor Department's proceedings and present your stance on their raised points.

If the employees consistently disregard your instructions, you have the full right to terminate them.

Authority of the Labor Department

The Labor Department has full authority to conduct dispute hearings. First, you need to review the conditions in the worker/employee's appointment letter to see if it includes provisions for termination in case of failure to meet sales-related targets.

Reviewing Establishment's Standing Orders

Check your establishment's standing orders to see the provisions for removing workers or any other employee, such as conducting an internal inquiry, and ensure you have followed those provisions. Attend the Labor Department's proceedings and clearly present your stance on the points they have raised.

Right to Terminate Employees

If the employees have consistently disregarded the instructions given by you, you have the full right to terminate them.

You need to take this up with a labor lawyer or at least a very good labor consultant (not just ones who can only file returns).

If you have evidence that she was given a warning and notice of the hearing, and she didn't attend, you have a stronger case. But be prepared for the matter going to court.

If you have an ICC under the prevention of sexual harassment law, then have the matters recorded of false complaints as it is an offense under the law. Take the help of experts.

Domestic Inquiry Process

What you missed, as other experts pointed out, is the process of Domestic Inquiry (DI). Additionally, upon the findings of the DI being 'guilty,' she should have been suspended, charged, and provided with a Show Cause Notice before termination. All these processes should be supported by undisputed records and documents.

In the absence of these processes, you have resorted to termination, which undoubtedly will be challenged, including in labor court/HC. The conciliation is likely to order the reinstatement of the employee in the absence of DI. You must face this with strong legal support. Entrust the case to an advocate specializing in labor disputes; this is the only option.

Alternative Resolution

Another option is to negotiate with the employee, try to settle by obtaining her resignation and paying some money so that you can avoid further legal battles.

From the details provided, we need to focus on the following key questions:

Does Office Staff Fall Under Labor Laws?

It depends on whether the employee is classified as a "workman" under the Industrial Disputes Act, 1947 (IDA).

- Workmen (Covered under the IDA): Includes employees engaged in manual, unskilled, skilled, technical, operational, or clerical work.
- Non-Workmen (Not Covered): Supervisory or managerial employees earning above ₹10,000 per month.

Since the employee was in the sales department, the key question is:

- Did she perform core sales tasks (like meeting clients, making calls, closing deals, etc.)? ➔ Likely a "workman."
- Did she hold a supervisory/managerial role (like managing teams, setting targets)? ➔ Not a "workman."

If she falls under "workman," she can approach the labor department.

Key Legal Issues & Employer Rights

Since the employee has approached the Labor Department, the case might be treated as an "illegal termination" or "wrongful dismissal" under Section 25F of the Industrial Disputes Act, 1947, if:

- She worked for more than 240 days in a year (continuous service).
- She was dismissed without proper notice, charge sheet, or domestic inquiry.

However, if proper memos and warnings were issued, the termination is justified.

What You Should Do Before the Hearing

Prepare Evidence:

- Copies of all memos, emails, and warnings given to her.
- Performance reviews and proof of poor performance.
- Record of her refusal to acknowledge warnings or the termination letter.
- Proof of full & final settlement (including the one-month compensation offered).
- Appointment letter & job description (to establish she wasn't a "workman").

Check Legal Compliance:

- Ensure termination was done as per company policy and IDA provisions.
- If she was a "workman," ideally, there should have been a domestic inquiry before dismissal.
- If her role was non-workman, the Shops and Establishment Act (State-specific) may apply.

Engage a Legal Representative:

- If you're unsure about compliance, consider consulting a labor law advocate before the hearing.

At the Labor Office Hearing

- Be professional and present all documents showing due process was followed.
- If the officer suggests reinstatement, argue that her performance and conduct justify the dismissal.
- If compensation is suggested, negotiate based on what was already offered.
- If an agreement isn't reached, the matter may move to the Labor Court.

Possible Outcomes

 Best case: The officer finds termination justified, then there will be no action.
 Compromise: The company agrees to pay a small compensation for a clean closure.
 Worst case: The matter goes to Labor Court, meaning a longer process but winnable with evidence.

We can conclude the following:

- Check if she qualifies as a "workman" under the IDA.
- Gather all documentary proof of poor performance and warnings.
- Attend the hearing with proper representation and be open to reasonable settlement discussions.

Verify:
You mentioned that the dismissed employee was office staff in the sales department. In India, labor laws (e.g., Industrial Disputes Act, 1947) generally apply to workmen, not managerial/supervisory employees. However, some sales employees may qualify as workmen if their job was non-managerial and non-supervisory. If she was in a purely sales/clerical role, she might be eligible to file a complaint under the Labour Department.

Before attending the hearing, gather all evidence to justify the dismissal:
- Appointment Letter – Clearly defining her role & employment terms.
- Performance Memos & Emails – Proof that she was warned multiple times.
- Dismissal Letter & Compensation Proof – If you tried to give her notice and compensation.
- Performance Reports – Showing how her poor performance affected the company.
- Exit Process Details – Any record of discussions held during termination.

Key Point: If she refused to acknowledge the dismissal letter, document how you attempted to serve it (email, registered post, etc.).

Understand Labor rule:
The Labor Department first acts as a mediator between the employer and employee. Their goal is to resolve disputes amicably before referring them to higher legal authorities. The hearing is an opportunity for you to present your case before any further action is taken.

Prepare for Hearing:
Be Professional & Stick to Facts – Do not engage emotionally; focus on documented facts.
 Clarify That Due Process Was Followed – Show evidence of warnings, memos, and termination notice.
 Mention Compensation Offer – Since you offered one month's salary as per company policy.
 Check If Settlement Is an Option – Sometimes, the labor officer may suggest a financial settlement.

Seek Legal Advice if needed:
If the Labor Officer insists on reinstatement or compensation, consult a labor lawyer. If the employee was a managerial-level staff, you may argue that she is not covered under the Labor Act and should go to the civil court, not the Labor Office.

Dear Mr. Shah,

I had similar issues when we terminated a number of employees. You have to ensure that your termination is in accordance with the Terms & Conditions of the appointment letter. If such Terms & Conditions are not mentioned, then notice/salary in lieu of the notice period is to be given as per the governing Act. If you have taken care to adhere to the Terms & Conditions, then there is no cause for worry.

My suggestion would be to reply by speed post to the notice but avoid attending any hearing at the Labor Department. The Labor Department will try to pressure you to accept demands put forth by the ex-employee. In case the ex-employee takes the matter to the Labor Court, then fight it out in court.

Feel free to contact me at [Phone Number Removed For Privacy-Reasons] for any further clarification, at no cost.

Col. Suresh Rathi

Proceedings in the Labour Office

Proceedings in the Labour Office are conciliation proceedings under the Industrial Disputes Act, 1947. If no settlement is reached between the employee and the employer, the conciliation officer submits a failure report to the state government, and the dispute is referred to a Labour Court. At this stage, it is not important to discuss whether she is a "workman" or not, but the employer should contest the case and file a written statement. Please note that the Labour Court has jurisdiction to decide the dispute on whether any employee is a "workman" or not. Therefore, all disputes would be decided by the Labour Court. My suggestion is that the employer should contest the case vigorously.

Regards, S. K. Mittal
Industrial & Labour Lawyer
[Phone Number Removed For Privacy-Reasons]